Cyberattacks and ransomware threats have risen with rapid digitalization and increased digital connectivity. As a result, organizations and enterprises with digital infrastructure increasingly spend on cybersecurity solutions to secure their client data and credentials from unauthorized access or use. According to Gartner, by 2025, 45% of organizations worldwide will have experienced attacks on their software supply chains, representing a three-fold increase from 2021.
Furthermore, the Ukraine-Russia war has increased the possibility of significant cyberattacks. In March, President Biden said the United States has “evolving intelligence” that Russia is “exploring options for potential cyberattacks” on countries backing Ukraine. Furthermore, the White House said that the National Security Memorandum would create plans to begin the lengthy process of updating U.S. IT infrastructure to protect against the cybersecurity threats posed by quantum computing. The global cybersecurity market is projected to grow at a 10.99% CAGR to $348.91 billion by 2027.
Given this backdrop, we think it could be wise to invest in high-quality cybersecurity stocks Check Point Software Technologies Ltd. (CHKP) and NortonLifeLock Inc. (NLOK). They are currently trading below their 52-week high but have the potential to rebound in the coming months.
Check Point Software Technologies Ltd. (CHKP)
Headquartered in Tel Aviv, Israel, CHKP develops, markets, and supports a range of products and services for IT security worldwide. The company provides network security, endpoint security, data security, and management solutions.
For the first quarter, ending March 31, 2022, CHKP’s revenues increased 7% year-over-year to $542.7 million. Its non-GAAP operating income amounted to $238.6 million, while the non-GAAP net income came in at $203.6 million. The company’s non-GAAP EPS increased 1.9% from its year-ago value to $1.57.
The $1.61 consensus EPS estimate for the second quarter ending, June 30, 2022, represents 0.30% year-over-year growth. Analysts expect revenue to increase 6.5% year-over-year to $560.06 million for the same period. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in all the trailing four quarters.
The stock has gained 5.5% in price year-to-date and 5.4% over the past six months. In addition, closing yesterday’s trading session at $122.94, the stock is currently trading 17.8% below its 52-week high of $149.62, which it hit on March 3, 2022.
CHKP’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
The stock also has an A grade for Quality and a B grade for Value. Within the Software – Security Industry, it is ranked #4 of 31 stocks.
To see additional POWR Ratings for Growth, Sentiment, Stability, and Momentum for CHKP, click here.
NortonLifeLock Inc. (NLOK)
Headquartered in Tempe, Arizona, NLOK provides cyber safety solutions for consumers worldwide. The company offers Norton 360, an integrated platform that provides extensive cyber safety coverage and a subscription service providing protection for PCs, Macs, and mobile devices against malware, viruses, adware, ransomware, and other online threats.
In March, NLOK announced its U.K. launch of Norton Identity Advisor Plus, which leverages the company’s consumer identity protection expertise to assist victims of identity theft resolve their issues. In the U.K., Norton Cyber Safety Insights Report conducted an online survey in partnership with The Harris Poll amongst 1,000 U.K. adults aged 18+, 55% of Brits accepted that they would have no idea what to do if their identity was stolen. And 60% of those surveyed admitted to being “very worried” that their identity would be stolen. Norton Identity Advisor Plus tries to address this concern by helping consumers each step of the way should they discover they are a victim of identity theft.
NLOK’s net revenues increased 6.5% year-over-year to $716 million during the third quarter, ending April 1, 2022. Its non-GAAP operating income grew 14.3% from its year-ago value to $391 million, while its non-GAAP net income improved 15.8% from its prior-year quarter to $271 million. The company’s non-GAAP EPS grew 15% year-over-year to $0.46.
Analysts expect NLOK’s revenue to increase 5.6% year-over-year to $709.62 million in the fourth quarter (ending March 31, 2022). The company’s EPS is expected to grow 11.9% year-over-year to $0.45 in the first quarter, ending March 31, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in all the trailing four quarters.
The company’s shares have surged 13.5% in price over the past year. Furthermore, closing yesterday’s trading session at $24.11, the stock is currently trading 22% below its 52-week high of $30.92, which it hit on Feb. 10, 2022.
NLOK’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Quality and a B for Value. Within the same industry, it is ranked #5 of 31 stocks.
In total, we rate NLOK on eight distinct levels. Beyond what we have stated above, we have also given NLOK grades for Growth, Stability Sentiment, and Momentum. Get all the NLOK ratings here.
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CHKP shares fell $0.45 (-0.37%) in premarket trading Friday. Year-to-date, CHKP has gained 5.47%, versus a -12.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing. More...
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